high quality louis vuitton replicas fake louis vuitton bags canada canada goose pas cher fake louis vuitton Replica Louis Vuitton Shoes louis vuitton outlet canada goose tilbud fack louis vuitton bags cheap goyard pas cher replica chanel shoes prada replica louis vuitton pas cher YSL replica Canada Goose Sale ysl replica replica louis vuitton bags gucci shoes replica bracelet cartier pas cher high quality louis vuitton replicas dior replica bags http://www.viamatic.fr/ louis vuitton replica uk Replica louis vuitton Belts uk fake cheap louis vuitton bags Replica Gucci Handbags Louis Vuitton Replica Handbags louis vuitton replica bags Canada Goose Pas Cher sac hermes pas cher fake cartier love ring hermes replica bags cheap louis vuitton Replica Prada Replica Bags hermes evelyne replica bolsos hermes replicas hermes replica replica gucci wallet fake louis vuitton bags replica Air Jordan 1 Retro gucci replica uk replica chanel shoes louis vuitton españa louis vuitton replica uk Louis Vuitton Replica Outlet sac louis vuitton pas cher chine louis vuitton china replica Replica Cartier Jewelry Replica Cartier Jewelry louis vuitton shoes replica uk Louis Vuitton Bags Outlet Australia replica van cleef & arpels jewelry replica cartier love bracelet uk sac louis vuitton solde louis vuitton pas cher Replica Cartier Love Bracelets gucci belt replica uk cheap louis vuitton replica Replica Cartier Jewelry australia gucci belt replica australia fake cartier love bracelet replica van cleef & arpels jewelry louis vuitton replica louis vuitton replica louis vuitton replica louis vuitton replica replica hermes handbags australia cheap louis vuitton Replica bags cheap louis vuitton Replic cheap louis vuitton Replic fake louis vuitton fake louis vuitton fake louis vuitton Replica louis vuitton Replica louis vuitton Replica louis vuitton Replica louis vuitton Replica louis vuitton

ABOUT  |   MATERIALS  |   CEU  |   TEACHERS & COUNSELORS  |   BUILD A MONTHLY BUDGET  |   TEST YOUR KNOWLEDGE  |   MILITARY  |   FINANCIAL ARTICLES  |   CONTACT



Become the Beneficiary of your own Financial Insurance Policy by having an EMERGENCY FUND

1/19/2016

The financial services industry tells households to have an emergency fund. Seldom if ever do they tell you why, or how much you need and where to save. Too often they use the same old rule of thumb. Rules that are many years old and may, or may not work. There is a much easier and better way for people to set their emergency fund goal with confidence, one that does make sense.

Most often, nine times out of ten the emergency fund is needed and used for loss of income, not loss of expenses. It makes perfect, logical sense to use income as the goal for an emergency fund, and hereís why. The emergency fund is replacing a loss of income in most cases, simple really. You donít lose expenses so why base an emergency fund on your expenses. Most households have no idea what their real monthly household expenses are, but most can tell you what their monthly gross income is. Even if they did know their monthly expenses, using a moving target to set a goal is illogical and is missing an opportunity to make this easy.

The emergency fund is only used for emergencies. The engine in your car blows-up, transmission fails, you need to move unexpected in short notice, and loss of a job or income; otherwise donít touch the emergency money. It takes maturity and discipline to have an emergency fund.

Itís recommended to use a balanced approach to build an emergency fund. Using a seven year term as a goal is a good balanced approach. This makes the monthly savings goal achievable by implementing a balanced plan. A proper emergency fund goal is six months gross income. This is easy to remember, so use this as a goal. Self-employed should set a larger goal, preferably 12 months income but set this as a ten year goal. If your household income fluctuates add your last three months of household income and divide the total by three to give you a good ball-park number to use.

Setting an Emergency Fund monthly savings amount.

Example: Monthly household gross income is $3,500 X 6 months = $21,000 then divide by 7 years (84) giving a goal to save $250 per month on average for the year. Some months you can save more, others less. Once you hit your goal donít stop saving.

 An emergency fund is not a 401 k or retirement account. Credit cards are not for emergencies, or loans. Become your own bank by using cash for an emergency fund, borrow from yourself for emergencies. Many say save it in a Money Market account. There may be better options than a money market account, with lower fees and higher interest. There are plenty of FDIC high interest savings accounts paying over 1% interest with 0 fees, 0 minimums and you can open with a few dollars with free access and free transfers. These higher interest savings accounts have been around for many years.

Make sure you are saving into your emergency fund first then your retirement second. You may need to use an emergency savings 10 to 20 times in your life before you ever need your retirement accounts. With a proper emergency fund you may be able to save your household from a bankruptcy, or dealing with debt collectors if you have an extended income interruption. Being able to cover expenses for an extended period of time while you recover from a financial emergency is priceless.




POST A COMMENT FOR THIS ARTICLE

* First Name:
* Last Name:
* E-mail Address:
* Comments
Security Image This Is CAPTCHA Image
Write the characters in the image above
* = required elements
Additional Articles:

2/13/2019:

1/22/2018: Income Insurance?

11/10/2016: Change Creates Profit Opportunities

10/5/2016: Your Wireless Plan, Does it Own You?

9/23/2016: The Legal Industry and A Questionable Practice!

8/25/2016: Seriously Folks!

8/18/2016: Looking for a Job, Create One!

8/17/2016: Is Your Handshake Your Word?

8/16/2016: The Two Income Trap

6/16/2016: Financial News, Who Can You Trust?

6/9/2016: Money Market Account? There is a Better Way

5/5/2016: What Are The Correct Savings Priorities?

4/20/2016: Focus on Values, Goals, Sacrifices, Not Money!

4/4/2016: Investment Risk

3/3/2016: Life Insurance?

View All
About  |   Materials  |   CEU  |   Teachers & Counselors  |   Build a Monthly Budget  |   Test Your Knowledge  |   Military  |   Financial Articles  |   Contact
Copyright Academy of Financial Literacy, Inc 2012 - 2019